The French government is considering additional measures to curb the impact of the sharp rise in market prices for electricity on French consumers, a source in the executive said Thursday.
Confirming information du Figaro, this government source clarified that the measures included the possibility for the executive not to apply the formula for calculating EDF tariffs next February, as well as the potential increase in the volumes of nuclear electricity that the group is forced to sell to its competitors at a preferential price.
Lower tax
This new plan is a follow-up to Prime Minister Jean Castex’s promise to limit the increase in regulated tariffs (TRV) to 4% in February and for the whole of 2022, after the surge in energy prices.
This limitation had to go through a reduction in the electricity tax (TICFE), a measure that the surge in prices on wholesale markets today risks rendering insufficient even in the event of a reduction of the tax to zero, the cost of which for public finances is nevertheless already estimated at eight billion euros.
Set a new price
The source interviewed by Reuters clarified that the implementation of the new plan would result in an amendment to the 2022 finance bill allowing the Ministers of Economy and Energy to “set a lower tariff level” what would be provided for the application of the formula for calculating TRVs in the event of an “exceptional” increase in market prices.
“Everyone agrees that it is essential to preserve the purchasing power of households and that it is also necessary to preserve public finances”, argued the source.
Increase competitor volumes
A “catching-up” could however take place in 2023 through a gradual increase in tariffs over twelve months, in order to cover the losses suffered by EDF due to the limitation of the TRV in February 2022.
The executive is considering also to increase electricity volumes from 100 to 150 terawatt-hours (TWh) that the group must sell to its competitors as part of the Arenh system (regulated access to historic nuclear electricity), which provides a preferential purchase price to alternative producers, in the second half of 2022.
Such a device would prevent the latter from having to pay very high prices on the wholesale markets, which would have repercussions on the prices applied to individual customers.
Discussions with Brussels
However, its implementation will require a green light from the European Commission. “Discussions have started, we are hopeful that it will be successful in early 2022,” said the source.
“This is a first step towards a sustainable functioning of the French market which can establish a fair exposure of French consumers to the evolution of costs.” EDF declined to comment on this information.
Its CEO, Jean-Bernard Lévy, regularly calls for the removal of Arenh – which he compares to “poison” – arguing that the system forces the group into debt and limits its investment capacity while subsidizing its competitors.
“Once again, regulation appears to be a burden for the group,” said Nicolas Bouthors, analyst at Alphavalue. “In my opinion, what most likely explains the negative reaction from today’s share price is some sort of investor fed-up with the weight of regulation and political inference,” he adds while stressing, however, that the measures envisaged should have only a limited impact for EDF.
Barclays analysts for their part see a “buying opportunity” in the drop in EDF shares given the context of still very high electricity market prices.